How To Start A Dropshipping Business

How To Start A Dropshipping Business

Still thinking on starting an online business and can’t decide where to start?

Maybe you heard something about dropshipping but not sure how to start a dropshipping business?

Well, this post is created for you. And hopefully, you’ll get something out of it.

What is Dropshipping?

There is so much jargon in this world that just confused anyone new to the online world. When I first heard the word dropshipping, I honestly don’t have any clue as to what it is all about and how it works.

To put it simply, Dropshipping is the process wherein a customer buys a product from an online store instead of going to the factory. The biggest catch here is that the online store does not keep inventory and therefore just acting like a bridge between the supplier and the buyer.

Dropshipping Model

Basically, there are 3 parties involved in this business model:

(1) Customer – anyone who buys the product online. You have probably already bought a product online without you knowing that it was done through dropshipping.

(2) Retailer – this is where you come in and tap in to the business. As a retailer, you will then set up a platform e.g. your very own website or you can do it through a third party marketplace like Amazon, eBay and the likes.

(3) Dropshipper – this is where you source your products in order to serve your customers. This is the wholesaler or otherwise known as the supplier.

Can You Make Money From Dropshipping? – Is it really profitable?

The quick answer is yes!

Dropshipping business has been around for almost 2 decades now. The fact that more players in the e-commerce business is now diving into this venture shows that there is a lot of potential in this industry.

The biggest thing about dropshipping is that you don’t have to rent a warehouse for the products you are selling. You have a very minimal cost and you can run your business wherever you are in the world as long as you have access to the internet.

So how do you make money out of it?

Basically, a customer who needs or wants something, search online to find the products.

Browsing The Internet

As a retailer, you will need to have a website with the products of your chosen niche. This will be your online store.

Online Store

You sell the product at a retail price through your online store then pay the dropshipper the wholesale price. Then, they will ship the product to the customer.

Supplier

To illustrate this,

Let’s say Customer A went to your online store and bought a product worth $120.

Let’s assume further that the cost of the product given to you by the wholesaler is $100.

In this particular scenario, you will have a gross profit of $20. This is also called your FMOC (Fixed Marked Up On Cost). There is no set rule for FMOC but some retailers use 20% as the average mark up.

Isn’t $20 too cheap?
Yes, I know that question is coming.

What if you sold 10 pieces? You’ll get $200.

What if you sold 100 pieces? Then you’ll get $2,000.

Your profit will depend on how profitable your niche is. If you are selling T shirts, your customers might be looking for matching family outfits too. This can literally make your profit double if not quadruple in just one order.

While browsing through some dropshipper suppliers, I noticed an item called RC3 GPS Heart Rate Monitor Sports Watch being sold by the wholesaler for $90 but the SRP is $350.

So, in just one order, you are already getting $260.

How To Start A Dropshipping Business?

Starting a dropshipping business sounds intimidating at first but if you know how to get started and have a bit of an idea of what to expect along the way, it makes it a lot easier.

So, let’s go through some steps you will need in order to kick start your dropshipping business journey.

(1) The first step is find a profitable niche.

Profitable Niche

How will you know it is profitable?

Make some research whether people are searching for the products you are interested to promote.

Google ang Bing search engines will be your best source of information since majority – around 90% of people online are using these sites to search for anything and every thing.

There are also keyword research tools you can use to find out whether your chosen products are being searched by people online.

An example of these tools is Jaaxy, which is one of my top recommended keyword research tool online.

Let’s say you want to find out whether people are searching for ‘matching family outfits’. By typing the word to Jaaxy, you will get some ideas whether you are targeting the right products to make your business profitable.

Matching Family Outfits

The search result shows that this keyword is getting around 300 searches. Basically these are your possible customers.

(2) Get a Reliable dropshipper or wholesale supplier.

Approved

Check the reviews about your suppliers. Make some research about them as they will be your business partners. How many people bought their products? Are they getting lots of returns?

Communicate with them and ask questions. Call them if you have to.

Try their products if your budget allows you so you’ll get the firsthand experience before promoting them.

(3) Build a website.

ecommerce

There are 2 ways you can choose in building your online store:

Paid One – Open an e-commerce store through an online store builder like Shopify.

Free – Build an online store using Content Management System like WordPress.

Where To Get Dropshipping Wholesale Suppliers

You can do some research and find lucrative product ideas from different dropshippers and you can compare which suppliers offer the most attractive rate that will ultimately give you the highest margin.

Below is the list of wholesale directory services where you can start choosing wholesale suppliers who can be your future dropshipping business partner:

Note: These companies are not actual suppliers so they do not sell any products.

(1) Aliexpress – this is one of Jack Ma’s company operating under Alibaba. You can find over 100 million products to sell online in this platform. If you are just starting out, I recommend you try sourcing your suppliers first here since it’s totally free.

(2) Worldwide brands (WWB) – there is a one time fee to get access to their wholesalers because they have already done their job for you – from inspecting product quality to visiting suppliers directly to overall record of service, etc. You can access over 16 million certified wholesale products.

(3) Salehoo – like Worldwide brands, there is also a fee to access their wholesalers. They offer a 7-day risk-free trial.

All of their suppliers are vetted so you have peace of mind that you won’t be scammed. You can find over 2 million products to sell through their wholesalers too.

(4) Doba – they also have over 2 million wholesale products. It is a paid platform and has a 14-day free trial. You can first get a feel of how their platform works and scout for possible supplier for your business. 

(5) Wholesale Central – this is another source of wholesalers and there is no membership required to use the site. They have a daily wholesale deals and promotions being posted by the approved wholesale suppliers listed in their directory.

Conclusion

Dropshipping is one of the most popular model for e-commerce entrepreneurs today. The key to succeed in this type of business is to find a profitable niche and find reliable dropshippers where you can scale your business.

I hope I was able to answer some questions you have in mind through this post. And if ever you have any more questions on this topic, leave a comment below and let’s get the conversation started.

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